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  Staff Interpretation Letter 2020-01
Identification Number 1779
This is in response to your correspondence asking if an amendment modifying the applicability of the annual limit for certain awards (the “Amendment”) issuable under a shareholder approved Equity Plan would be considered a material amendment and, as a result, require shareholder approval under Listing Rule 5635(c) and IM-5635-1 (collectively, the “Rule”).  

The Equity Plan is an equity compensation plan, which required shareholder approval under the Listing Rules and was approved by the shareholders.  The Equity Plan provides for grants of a variety of stock-based awards including options, stock appreciation rights and restricted share awards to employees, consultants and directors of the Company.

You stated that the Equity Plan establishes an Annual Value Limit, which is the maximum value that can be granted to any director of shares of common stock subject to awards granted during a single fiscal year, together with any cash fees paid to such director during the fiscal year. You further stated that the compensation committee of the Company’s board of directors determined that it was in the best interest of the Company and its stockholders to include a “meaningful limit” in the Equity Plan on the compensation of directors for their service on the board, which has become a widely accepted best practice for Delaware corporations.

You stated that the Annual Value Limit was meant to be applicable only to the non-employee directors rather than all directors and that the difference was a result of a scrivener’s error. You also point to disclosure in the Company’s proxy seeking approval of the Equity Plan that is consistent with this view.  The Amendment will modify the Equity Plan making the Annual Value Limit applicable only to the non-employee directors.

Following our review of the information provided, we have determined that the Amendment would not be a material amendment for purposes of the Rule. While the Amendment changes the applicability of the Annual Value Limit, there will be no increase in the maximum number of shares to be issued under the Equity Plan. As such, the Amendment may affect the timing of when certain awards could be made, but it will not increase the overall dilution possible under the Equity Plan, and therefore does not result in any material increase in benefits to the participants. The Amendment also does not result in any material expansion in the class of participants eligible to participate in the Equity Plan. Finally, the Amendment does not result in any expansion in the types of awards provided under the Equity Plan.
 
Publication Date*: 12/15/2020 Mailto Link Identification Number: 1779
material_search_footer*The Publication Date reflects the date of first inclusion in the Reference Library, which was launched on July 31, 2012, or a subsequent update to the material. Material may have been previously available on a different Nasdaq web site.
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